What would you do at 50 yrs old?

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broadstone
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What would you do at 50 yrs old?

Post by broadstone »

Hi

(edited to provide better info)

I'm a bit lost as to which direction to go with my personal finances approaching age 50 so I thought I would ask you Bogleheads, what would you do /change if you were me?

My position:

Emergency funds: 6 months ($3k per month expenses)

Debt: Mortgage, $40,000 2.7% 30 yrs left

Tax Filing Status: Single

Tax Rate: 24% Federal, 0% State

State of Residence: Florida

Net Income: $50k per year. Self employed so income fluctuates.

Age: 50

No estate planning completed. (I know I need to do this)

Goal to "retire" with SS at age 65
What will the monthly pension? 401k, IRA, etc, be? I have no idea (being honest)
Monthly expenses in retirement (predict/project)? $3,000 per month

Desired Asset allocation: 100% stocks / 0% bonds (I'm likely too risky here)
Desired International allocation:0% of stocks

Please provide an approximate size of your total portfolio: $500k

Current retirement assets: 2/3 ownership of rental home brings in $500 NET per month. 1/3 owned by a family member.

Taxable - $230k
VTSAX

SOLO Roth 401k = $80k
VTI

Roth IRA = $180k
VTI

Cash in savings $200k includes emergency fund (earning 2%)

New annual Contributions
$19,500 Solo 401k
$6,500 Roth IRA
$0 taxable

Questions:

I feel like I should use the cash to invest into something income producing for retirement. Housing market feels like the wrong time to buy a rental property and the markets are looking rocky so some fear about adding more to VTI / VTSAX.

What changes would you make?

Thanks
Last edited by broadstone on Tue Sep 20, 2022 2:13 pm, edited 12 times in total.
kd2008
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Re: What would you do at 50 yrs old?

Post by kd2008 »

What are your expenses? What do you want to achieve by making changes? What do you think you will miss out on if you do not make changes?
sailaway
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Re: What would you do at 50 yrs old?

Post by sailaway »

Is there a reason you have not opened a brokerage account?

My decisions are goal and priority based, not age. My 50 looks very different than your 50. What are your goals?
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Sandtrap
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Re: What would you do at 50 yrs old?

Post by Sandtrap »

broadstone wrote: Sat Sep 17, 2022 1:08 pm Hi

I'm a bit lost as to which direction to go with my personal finances approaching age 50 so I thought I would ask you Bogleheads, what would you do?

Here's my position, single no children.

Investments (mostly index funds): $500,000 (contribute to Roth and Solo 401k annually)
Cash:$200,000
Mortgage: $40,000 (2.7%)
I own 2/3 of a rental home which brings in $750 p/m
Income gross is between $50k - $75k per year.

No other debt.


I feel like I should use the cash to invest into something income producing for retirement. Housing marke feels like the wrong time for a rental property and the markets are looking rocky so some fear about adding more to VTI.

What changes would you make?
To OP:

Not enough information except to make a lot of assumptions or general input and opinioniations that are not specific to "you" but apply to someone else, etc.

Please edit your "original/first post" to include the following format and data.
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

use the pencil icon to do the edit on the original first post.

by doing this, you will get more comprehensive input,
also might help to add or insert into the title of the post "portfolio review".

To OP:
Questions to insert into your edit.
1
what is the nature of the index funds, allocation, what funds, where, etc?
2
2/3 ownership of the rental, why not all of it?
income is low, why?
what is your "net" monthly cash flow from this rental?
Who else owns it?
3
Net monthly income after taxes etc.?
4
Monthly expenses, all of it?
5
Is your goal to "retire" with a Pension and SS, etc, at age 65?
What will the monthly pension? 401k, IRA, etc, be?
Monthly expenses in retirement (predict/project)?
6
Have you done estate planning? Will? Trust?

thanks
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
Grt2bOutdoors
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Re: What would you do at 50 yrs old?

Post by Grt2bOutdoors »

When the markets decline, people feel they "need to do something". When the advice given here is to "do nothing".

You've done good on the accumulation front. Congrats!
Why do you think you need to do anything? You said it yourself, the housing market looks frothy and you are unsure of the stock market.
The best advice I can offer is to do nothing. Wait until you are ready to do something, that is what I would tell my 50 year old self. You invest based on your need, ability and willingness to take risk. Not someone else's risk tolerance.

In the meantime, where do you have the cash? Is it earning a market rate of interest? You could buy a money market fund that yields over 2% while you ponder your next steps. There is no rush and avoid anyone who pushes you or tells you that you are nuts to hold all that cash. True you might be losing some value to inflation, but given what's happened year to date, you can also say you would have lost a whole lot more in just about any investment suggested.

Remember, an investment is something you plan on holding either forever or at least 5 years, preferably 10 or more. There is no rush.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: What would you do at 50 yrs old?

Post by Golf maniac »

Have 6 to 12 months in liquid emergency fund. With the remainder set up in a 3 fund portfolio in a brokerage account. More information on your retirement goals would be helpful to give a more personalized answer. Personally I wouldn’t want any type of RE that would tie me down in my retirement years.
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Watty
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Re: What would you do at 50 yrs old?

Post by Watty »

broadstone wrote: Sat Sep 17, 2022 1:08 pm Mortgage: $40,000 (2.7%)
I own 2/3 of a rental home which brings in $750 p/m
.....

What changes would you make?
1) I would pay off the mortgage since it is so small. That will improve your cash flow and any theoretical mathematical advantage of using the mortgage for leverage would be modest because of the low balance. In some ways the mortgage is like a negative bond which also impacts your overall asset allocation, there are lots of old threads about that which you can look up

2) I would review what is going on with owning 2/3 rds of a rental home. That is a screwy situation and as you head into retirement simplifying things as much as possible is a good goal. You could buy them our, sell them your portion or sell the entire property. Even if it is working well now it might not work as well when you are 75+ years old and less capable. If one of you dies it will also make settling their estate more complex.

But that is just me.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

kd2008 wrote: Sat Sep 17, 2022 1:14 pm What are your expenses? What do you want to achieve by making changes? What do you think you will miss out on if you do not make changes?
Expenses are $3k per month. Goal is to have income at retirement so I don't have to work until I'm 100. I feel like I have too much cash wasting away to inflation.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

Watty wrote: Sat Sep 17, 2022 8:24 pm
broadstone wrote: Sat Sep 17, 2022 1:08 pm Mortgage: $40,000 (2.7%)
I own 2/3 of a rental home which brings in $750 p/m
.....

What changes would you make?
1) I would pay off the mortgage since it is so small. That will improve your cash flow and any theoretical mathematical advantage of using the mortgage for leverage would be modest because of the low balance. In some ways the mortgage is like a negative bond which also impacts your overall asset allocation, there are lots of old threads about that which you can look up

2) I would review what is going on with owning 2/3 rds of a rental home. That is a screwy situation and as you head into retirement simplifying things as much as possible is a good goal. You could buy them our, sell them your portion or sell the entire property. Even if it is working well now it might not work as well when you are 75+ years old and less capable. If one of you dies it will also make settling their estate more complex.

But that is just me.
Thanks for your suggestions. The rental property can't be changed for now, it's part of an estate fund inheritance situation overseas.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

Grt2bOutdoors wrote: Sat Sep 17, 2022 1:30 pm When the markets decline, people feel they "need to do something". When the advice given here is to "do nothing".

You've done good on the accumulation front. Congrats!

Why do you think you need to do anything?
Thanks!

I've been sitting on cash for 10 years (mad at myself for this!) and since Im 50 I feel the need to put the money to work otherwise I'll never get to a point of having enough assets to retire. I feel very much behind most others at my age who post on here.
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Watty
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Re: What would you do at 50 yrs old?

Post by Watty »

broadstone wrote: Sat Sep 17, 2022 9:42 pm I feel very much behind most others at my age who post on here.
You are doing great and far better off than most people your age.

For comparison see my "Can I retire?" from seven years ago when I was 59. You are on track to have more than I did when you are that age and you are single.

viewtopic.php?t=167664
Vanguard User
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Re: What would you do at 50 yrs old?

Post by Vanguard User »

Way too much in EF. You can at least do $10k in iBonds earning nearly 10%.

Only keep 6 months of expenses and the rest on VTSAX taxable. Done.
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JoeRetire
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Re: What would you do at 50 yrs old?

Post by JoeRetire »

Watty wrote: Sat Sep 17, 2022 8:24 pm 1) I would pay off the mortgage since it is so small. That will improve your cash flow and any theoretical mathematical advantage of using the mortgage for leverage would be modest because of the low balance. In some ways the mortgage is like a negative bond which also impacts your overall asset allocation, there are lots of old threads about that which you can look up
I would not pay off such a low rate mortgage.

I don't see any value in improving your cash flow such a small amount. And even if I agreed that a mortgage is like a negative bond, it's so small as to have minimal impact on asset allocation.
Oh, noooooo! I'm so sorry, it's the moops! The correct answer is 'the moops'.
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JoeRetire
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Re: What would you do at 50 yrs old?

Post by JoeRetire »

broadstone wrote: Sat Sep 17, 2022 1:08 pm I'm a bit lost as to which direction to go with my personal finances approaching age 50 so I thought I would ask you Bogleheads, what would you do /change?

What changes would you make?
I would figure out what my eventual pension would be. It might be minimal, it might be huge. It might be a big factor in retirement. I would want to know that now.

I would invest a lot of that cash, just keeping about 6 months of expenses as an emergency fund.
Oh, noooooo! I'm so sorry, it's the moops! The correct answer is 'the moops'.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

JoeRetire wrote: Sun Sep 18, 2022 5:59 am
broadstone wrote: Sat Sep 17, 2022 1:08 pm I'm a bit lost as to which direction to go with my personal finances approaching age 50 so I thought I would ask you Bogleheads, what would you do /change?

What changes would you make?
I would figure out what my eventual pension would be.
Aside of Social Security which I'm not even sure will exist when I retire, I won't have a pension
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

Watty wrote: Sat Sep 17, 2022 9:58 pm
broadstone wrote: Sat Sep 17, 2022 9:42 pm I feel very much behind most others at my age who post on here.
You are doing great and far better off than most people your age.

For comparison see my "Can I retire?" from seven years ago when I was 59. You are on track to have more than I did when you are that age and you are single.

viewtopic.php?t=167664
Thanks for the encouraging words, maybe I'm not as far behind as I think.

I read your thread. Did you did retire when you wanted to?
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retiredjg
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Re: What would you do at 50 yrs old?

Post by retiredjg »

Your reported income and your tax bracket are inconsistent. It appears to me you might be in the 12% bracket or the 22% bracket. Why do you think you are in the 24% bracket?

Are you likely to remain single forever?

You seem to be saving only in after-tax accounts. Do you have nothing in tax-deferred accounts? With a pension that might work out, but it is definitely not the right approach with no pension.

At 50 years old, I think 100% stocks is unlikely to be a good choice. You need to at least start thinking about preservation of what you have. You may expect to work another 15 years, but many people find themselves unexpectedly retired and or disabled before that time. You need to start investing in bonds now...in the 401k. Put the money you save in taxes into Roth IRA (limit this year for you is $7k).

I don't think you are "behind" in your retirement savings, especially when you consider your low expenses. Yes, there are many wealthy people here, but it is a mistake to compare your situation to theirs or assume they are the norm. You have way more in savings than the average person.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

retiredjg wrote: Sun Sep 18, 2022 10:25 am Your reported income and your tax bracket are inconsistent. It appears to me you might be in the 12% bracket or the 22% bracket. Why do you think you are in the 24% bracket?

Are you likely to remain single forever?

You seem to be saving only in after-tax accounts. Do you have nothing in tax-deferred accounts? With a pension that might work out, but it is definitely not the right approach with no pension.
You are probably correct about the tax bracket, I'm not very informed on taxes...which check into it

Don't plan on marriage again. :happy

I was going to start contributing to Solo 401k going forward than Roth solo 401k. Is that what you are suggesting?

Thanks for your feedback
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Re: What would you do at 50 yrs old?

Post by Minty »

OP, do you have approximately $500K invested in VTI/VTSAX, PLUS $200K cash savings, for a total portfolio of around $700K? Or is the total around $500K? And how much is your house worth?

Finally, what is your estimated Social Security retirement income? If you have not pulled your report, you can do so here.
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15 -> R4 1.875% 15
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retiredjg
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Re: What would you do at 50 yrs old?

Post by retiredjg »

broadstone wrote: Sun Sep 18, 2022 10:50 am
retiredjg wrote: Sun Sep 18, 2022 10:25 am Your reported income and your tax bracket are inconsistent. It appears to me you might be in the 12% bracket or the 22% bracket. Why do you think you are in the 24% bracket?

Are you likely to remain single forever?

You seem to be saving only in after-tax accounts. Do you have nothing in tax-deferred accounts? With a pension that might work out, but it is definitely not the right approach with no pension.
You are probably correct about the tax bracket, I'm not very informed on taxes...which check into it
Compare your taxable income, line 15 on your tax return, to this chart to figure out your tax bracket. It should be accurate unless a large portion of your income is from capital gains/qualified dividends.

http://www.moneychimp.com/features/tax_brackets.htm


I was going to start contributing to Solo 401k going forward than Roth solo 401k. Is that what you are suggesting?
Yes. Depending on what you find out about your tax bracket, it might be possible to contribute enough pre-tax to get your income into the 12% bracket...then save everything else in Roth 401k and/or Roth IRA. Considering that you have no pre-tax assets at this point, that would be ideal. However, your income may be too high for that.

What does "net" $50k mean to you? Is that before or after deductions? Is that including the rental income?
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Re: What would you do at 50 yrs old?

Post by smitcat »

Minty wrote: Sun Sep 18, 2022 11:03 am OP, do you have approximately $500K invested in VTI/VTSAX, PLUS $200K cash savings, for a total portfolio of around $700K? Or is the total around $500K? And how much is your house worth?

Finally, what is your estimated Social Security retirement income? If you have not pulled your report, you can do so here.
"Finally, what is your estimated Social Security retirement income? If you have not pulled your report, you can do so here."
That is the key question - with expenses of $36K per year he may be in very good shape.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

Minty wrote: Sun Sep 18, 2022 11:03 am OP, do you have approximately $500K invested in VTI/VTSAX, PLUS $200K cash savings, for a total portfolio of around $700K? Or is the total around $500K? And how much is your house worth?

Finally, what is your estimated Social Security retirement income? If you have not pulled your report, you can do so here.
$500k in VTSAX + $200k in cash = $700k total

Estimated social security is $1480 monthly taken at 65

Thanks
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

retiredjg wrote: Sun Sep 18, 2022 11:15 am
broadstone wrote: Sun Sep 18, 2022 10:50 am
retiredjg wrote: Sun Sep 18, 2022 10:25 am Your reported income and your tax bracket are inconsistent. It appears to me you might be in the 12% bracket or the 22% bracket. Why do you think you are in the 24% bracket?

Are you likely to remain single forever?

You seem to be saving only in after-tax accounts. Do you have nothing in tax-deferred accounts? With a pension that might work out, but it is definitely not the right approach with no pension.
You are probably correct about the tax bracket, I'm not very informed on taxes...which check into it
Compare your taxable income, line 15 on your tax return, to this chart to figure out your tax bracket. It should be accurate unless a large portion of your income is from capital gains/qualified dividends.

http://www.moneychimp.com/features/tax_brackets.htm


I was going to start contributing to Solo 401k going forward than Roth solo 401k. Is that what you are suggesting?
Yes. Depending on what you find out about your tax bracket, it might be possible to contribute enough pre-tax to get your income into the 12% bracket...then save everything else in Roth 401k and/or Roth IRA. Considering that you have no pre-tax assets at this point, that would be ideal. However, your income may be too high for that.

What does "net" $50k mean to you? Is that before or after deductions? Is that including the rental income?
I checked my tax return. I'm currently in the 22% tax bracket and have been for the last few years. Net $50k to me means that's my after tax income on average. Would you still suggest I use the Pre-tax method? According to my tax return I can contribute up to $58,000 total in Solo Roth and Solo 401k. Since I've contributed $19.5k into the Roth solo 401k, maybe I can put another $38,500 into the solo pre tax 401k?

I find the Solo 401k quite tricky to understand.

Thanks for the feedback. Most helpful.
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Taylor Larimore
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Re: What would you do at 50 yrs old?

Post by Taylor Larimore »

Bogleheads:

It may feel strange, but the best time to invest in the stock market is when stocks are down -- like now.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The mistakes we make as investors is when the market’s going up, we think it’s going to go up forever. When the market goes down, we think it’s going to go down forever. Neither of those things actually happen. It doesn’t do anything forever. It’s by the moment."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: What would you do at 50 yrs old?

Post by smitcat »

broadstone wrote: Sun Sep 18, 2022 12:28 pm
Minty wrote: Sun Sep 18, 2022 11:03 am OP, do you have approximately $500K invested in VTI/VTSAX, PLUS $200K cash savings, for a total portfolio of around $700K? Or is the total around $500K? And how much is your house worth?

Finally, what is your estimated Social Security retirement income? If you have not pulled your report, you can do so here.
$500k in VTSAX + $200k in cash = $700k total

Code: Select all

Estimated social security is $1480 monthly taken at 65
Thanks
You are in good shape, here is one way to review your current situation:

"Estimated social security is $1480 monthly taken at 65"
That is at age 65 and in today's dollars... which will get adjusted over time so let's stay working with today's dollars.

If you check out what your SS will be at age 70 I think you will get about $25K per year.
If you add to that $25K for SS the $6K per year you net from the rental you have about $31K without any portfolio use.
Your expenses require about $36K per year so you need another $5K from your savings. ($36 - $31 = $5)
You also need $36K each year from age 65 to 70 until you take your SS.

Current $700K less $180K ($36 X 5) = $520 left
A $5K draw on a $520K portfolio is less than 1%.

And that is working with what you have saved up till now not including any savings in the future.
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Re: What would you do at 50 yrs old?

Post by retiredjg »

broadstone wrote: Sun Sep 18, 2022 12:35 pm Would you still suggest I use the Pre-tax method?
Yes. You apparently have $0 in traditional (pre-tax) savings. It is important to have some pre-tax dollars in retirement to fill the lower tax brackets.

Also, you might actually be in a lower tax bracket in retirement which makes using tax-deferral preferable now. This is a little unusual for a single person with a good sized savings, but it seems it could happen for you. I've drawn that conclusion based on your current living expenses which (if you were in retirement today) would put you in the current 12% bracket.

According to my tax return I can contribute up to $58,000 total in Solo Roth and Solo 401k. Since I've contributed $19.5k into the Roth solo 401k, maybe I can put another $38,500 into the solo pre tax 401k?
It appears you are only partially understanding your Solo 401k. You should learn more.

You can only contribute the $20.5k (plus $6,500 since you are now over 50) as an employee. However, you can fill the rest of that $61,000 (this year's number) with employer contributions if you have enough income.

I find the Solo 401k quite tricky to understand.
Start here. https://www.irs.gov/retirement-plans/on ... 401k-plans and here https://www.bogleheads.org/wiki/Solo_401(k)_plan
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JoeRetire
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Re: What would you do at 50 yrs old?

Post by JoeRetire »

broadstone wrote: Sun Sep 18, 2022 10:06 am
JoeRetire wrote: Sun Sep 18, 2022 5:59 am
broadstone wrote: Sat Sep 17, 2022 1:08 pm I'm a bit lost as to which direction to go with my personal finances approaching age 50 so I thought I would ask you Bogleheads, what would you do /change?

What changes would you make?
I would figure out what my eventual pension would be.
Aside of Social Security which I'm not even sure will exist when I retire, I won't have a pension
Okay. In response to "What will the monthly pension? 401k, IRA, etc, be?", you wrote "I have no idea (being honest)". So you figured it out. Good.

Social Security will exist. No reason to be silly.
Oh, noooooo! I'm so sorry, it's the moops! The correct answer is 'the moops'.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

retiredjg wrote: Sun Sep 18, 2022 1:56 pm
broadstone wrote: Sun Sep 18, 2022 12:35 pm Would you still suggest I use the Pre-tax method?
Yes. You apparently have $0 in traditional (pre-tax) savings. It is important to have some pre-tax dollars in retirement to fill the lower tax brackets.

Also, you might actually be in a lower tax bracket in retirement which makes using tax-deferral preferable now. This is a little unusual for a single person with a good sized savings, but it seems it could happen for you. I've drawn that conclusion based on your current living expenses which (if you were in retirement today) would put you in the current 12% bracket.

According to my tax return I can contribute up to $58,000 total in Solo Roth and Solo 401k. Since I've contributed $19.5k into the Roth solo 401k, maybe I can put another $38,500 into the solo pre tax 401k?
It appears you are only partially understanding your Solo 401k. You should learn more.

You can only contribute the $20.5k (plus $6,500 since you are now over 50) as an employee. However, you can fill the rest of that $61,000 (this year's number) with employer contributions if you have enough income.

I find the Solo 401k quite tricky to understand.
Start here. https://www.irs.gov/retirement-plans/on ... 401k-plans and here https://www.bogleheads.org/wiki/Solo_401(k)_plan
I will look into the 401k contributions. Thank you for the info
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Re: What would you do at 50 yrs old?

Post by JDave »

I'd do an every penny budget for 1-2 years. You don't know where you stand until you have a firm handle on your expenses. Yes, it's a bit of a nuisance, but it makes planning so much better.
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Re: What would you do at 50 yrs old?

Post by hudson »

broadstone wrote: Sat Sep 17, 2022 1:08 pm Hi

(edited to provide better info)

I'm a bit lost as to which direction to go with my personal finances approaching age 50 so I thought I would ask you Bogleheads, what would you do /change if you were me?

My position:

Emergency funds: 6 months ($3k per month expenses)

Debt: Mortgage, $40,0000 2.7% 30 yr

Tax Filing Status: Single

Tax Rate: 24% Federal, 0% State

State of Residence: Florida

Net Income: $50k per year. Self employed so income fluctuates.

Age: 50

No estate planning completed. (I know I need to do this)

Goal to "retire" with SS at age 65
What will the monthly pension? 401k, IRA, etc, be? I have no idea (being honest)
Monthly expenses in retirement (predict/project)? $3,000 per month

Desired Asset allocation: 100% stocks / 0% bonds (I'm likely too risky here)
Desired International allocation:0% of stocks

Please provide an approximate size of your total portfolio: $500k

Current retirement assets: 2/3 ownership of rental home brings in $500 NET per month. 1/3 owned by a family member.

Taxable - $230k
VTSAX

SOLO Roth 401k = $80k
VTI

Roth IRA = $180k
VTI

Cash in savings $200k includes emergency fund (earning 2%)

New annual Contributions
$19,500 Solo 401k
$6,500 Roth IRA
$0 taxable

Questions:

I feel like I should use the cash to invest into something income producing for retirement. Housing market feels like the wrong time to buy a rental property and the markets are looking rocky so some fear about adding more to VTI / VTSAX.

What changes would you make?

Thanks
You don't appear to be lost; you appear to be on the right track.
Study up on high quality fixed income and duration matching.
Don't retire with any debt.
Have estate plan done by a pro.
When you get to near 65 re-evaluate to see if you need to go to your FRA (full retirement age).
retire2022
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Location: NYC

Re: What would you do at 50 yrs old?

Post by retire2022 »

broadstone wrote: Sat Sep 17, 2022 1:08 pm
Debt: Mortgage, $40,0000 2.7% 30 yr
How many zero's in your outstanding balance mortgage? is it 40K or 400k?
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

retire2022 wrote: Mon Sep 19, 2022 6:02 pm
broadstone wrote: Sat Sep 17, 2022 1:08 pm
Debt: Mortgage, $40,0000 2.7% 30 yr
How many zero's in your outstanding balance mortgage? is it 40K or 400k?
$40,000 thank God :)
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broadstone
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Location: USA

Re: What would you do at 50 yrs old?

Post by broadstone »

hudson wrote: Mon Sep 19, 2022 4:01 pm
You don't appear to be lost; you appear to be on the right track.
Study up on high quality fixed income and duration matching.
Don't retire with any debt.
Have estate plan done by a pro.
When you get to near 65 re-evaluate to see if you need to go to your FRA (full retirement age).
Great advice....

Can you give an example of fixed income and duration matching?
hudson
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Joined: Fri Apr 06, 2007 9:15 am

Re: What would you do at 50 yrs old?

Post by hudson »

broadstone wrote: Tue Sep 20, 2022 2:14 pm
hudson wrote: Mon Sep 19, 2022 4:01 pm
You don't appear to be lost; you appear to be on the right track.
Study up on high quality fixed income and duration matching.
Don't retire with any debt.
Have estate plan done by a pro.
When you get to near 65 re-evaluate to see if you need to go to your FRA (full retirement age).
Great advice....

Can you give an example of fixed income and duration matching?
I like the highest quality fixed income like FDIC CDs from banks or through a brokerage...or nominal/inflation protect treasuries. AAA/AA munis might work for those in higher tax brackets.

Duration Matching links:
viewtopic.php?p=3759199#p3759199

viewtopic.php?p=5810065#p5810065

viewtopic.php?t=318412
Charon
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Re: What would you do at 50 yrs old?

Post by Charon »

broadstone wrote: Sun Sep 18, 2022 12:35 pm I find the Solo 401k quite tricky to understand.
They are a bit, at least for the employer-side contributions. And once you accumulate $250k there are reporting requirements with draconian late penalties.

Is there are reason you're not using a SEP IRA instead?

I admit that I don't quite understand your income situation. You say you have a net income of $50k, which means a gross income of about $69k if you're not putting anything into tax deferred. (You can't tweak this much even with tax deferred, not and stay in the 22% bracket.) I'm not accounting for your deducting expenses.

So a net business income of $60k-ish (roundly). Thus a SEP limit of $15k, a Roth limit of $7k, and this has you saving 22/53 = 42% of your entire net income for retirement, leaving you with only $2580/month to live on. You say your expenses are $3k/month. (The $53k net income is because you're now tax deferring some income.)

Thus a SEP IRA would allow you to save more than you possibly could. There are no advantages to a solo 401(k) for you, then. (The advantage of the more complex 401(k) is simply that it has a higher deferral limit for moderate-income business owners.)

Unless you're trying to shovel some of that cash into tax-deferred retirement, in which case the solo 401(k) could be briefly useful - until you move that cash - but then I'd recommend moving away from it.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

Charon wrote: Tue Sep 20, 2022 11:04 pm
broadstone wrote: Sun Sep 18, 2022 12:35 pm I find the Solo 401k quite tricky to understand.
They are a bit, at least for the employer-side contributions. And once you accumulate $250k there are reporting requirements with draconian late penalties.

Is there are reason you're not using a SEP IRA instead?

I admit that I don't quite understand your income situation. You say you have a net income of $50k, which means a gross income of about $69k if you're not putting anything into tax deferred. (You can't tweak this much even with tax deferred, not and stay in the 22% bracket.) I'm not accounting for your deducting expenses.

So a net business income of $60k-ish (roundly). Thus a SEP limit of $15k, a Roth limit of $7k, and this has you saving 22/53 = 42% of your entire net income for retirement, leaving you with only $2580/month to live on. You say your expenses are $3k/month. (The $53k net income is because you're now tax deferring some income.)

Thus a SEP IRA would allow you to save more than you possibly could. There are no advantages to a solo 401(k) for you, then. (The advantage of the more complex 401(k) is simply that it has a higher deferral limit for moderate-income business owners.)

Unless you're trying to shovel some of that cash into tax-deferred retirement, in which case the solo 401(k) could be briefly useful - until you move that cash - but then I'd recommend moving away from it.
I opened a SEP to start with a couple of years ago but the my accountant said to go the Solo 401k route as you can contribute more into the Solo 401k plus it offers the Roth and Traditional:

"Despite similar limits on annual contributions, the solo 401(k) can help you save more quickly. The SEP IRA allows you to save 25 percent of your income in the account. In contrast, with a solo 401(k), you can save up to 100 percent as an employee contribution, up to the annual threshold, and then you can flip to employer contributions at up to a 25 percent rate."
Charon
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Re: What would you do at 50 yrs old?

Post by Charon »

broadstone wrote: Wed Sep 21, 2022 7:25 pm
Charon wrote: Tue Sep 20, 2022 11:04 pm
broadstone wrote: Sun Sep 18, 2022 12:35 pm I find the Solo 401k quite tricky to understand.
They are a bit, at least for the employer-side contributions. And once you accumulate $250k there are reporting requirements with draconian late penalties.

Is there are reason you're not using a SEP IRA instead?

I admit that I don't quite understand your income situation. You say you have a net income of $50k, which means a gross income of about $69k if you're not putting anything into tax deferred. (You can't tweak this much even with tax deferred, not and stay in the 22% bracket.) I'm not accounting for your deducting expenses.

So a net business income of $60k-ish (roundly). Thus a SEP limit of $15k, a Roth limit of $7k, and this has you saving 22/53 = 42% of your entire net income for retirement, leaving you with only $2580/month to live on. You say your expenses are $3k/month. (The $53k net income is because you're now tax deferring some income.)

Thus a SEP IRA would allow you to save more than you possibly could. [emphasis added] There are no advantages to a solo 401(k) for you, then. (The advantage of the more complex 401(k) is simply that it has a higher deferral limit for moderate-income business owners.)

Unless you're trying to shovel some of that cash into tax-deferred retirement, in which case the solo 401(k) could be briefly useful - until you move that cash - but then I'd recommend moving away from it.
I opened a SEP to start with a couple of years ago but the my accountant said to go the Solo 401k route as you can contribute more into the Solo 401k plus it offers the Roth and Traditional:

"Despite similar limits on annual contributions, the solo 401(k) can help you save more quickly. The SEP IRA allows you to save 25 percent of your income in the account. In contrast, with a solo 401(k), you can save up to 100 percent as an employee contribution, up to the annual threshold, and then you can flip to employer contributions at up to a 25 percent rate."
The entire point of my math was to make clear that you can't hit even the SEP limit, so it doesn't matter that the SEP limit is lower than the i401(k) limit. The SEP limits already would allow you to save so much that you wouldn't have enough income to live on.

As I said, the only exception I can see is if you're trying to shovel existing cash into retirement accounts, which is a strategy that could last as long as you have excess cash.

As for Roth vs. traditional, you currently have way too much money that is post tax (Roth and taxable). You should be working on greatly increasing tax-deferred savings. Your current portfolio would only be appropriate for someone with a large pension. You say you're self employed, so I assume you'll have no pension (although for some reason in your original post you say you're not sure about this?).
Charon
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Re: What would you do at 50 yrs old?

Post by Charon »

broadstone wrote: Wed Sep 21, 2022 7:25 pm "Despite similar limits on annual contributions, the solo 401(k) can help you save more quickly. The SEP IRA allows you to save 25 percent of your income in the account. In contrast, with a solo 401(k), you can save up to 100 percent as an employee contribution, up to the annual threshold, and then you can flip to employer contributions at up to a 25 percent rate."
By the way, that 25% employer-side contribution is only for corporations, where you're issuing yourself a W-2. If you have a sole proprietorship or partnership, it's 20% of net income, which involves your business deductions, 1/2 of your self-employment tax, and your employee-side contributions.

As we've said, i401(k)s are complicated. I use one for my wife, but that's only because in some good years she makes enough to make it worthwhile, and she can contribute well over the SEP limits. If she had a consistently lower income, I'd use a SEP IRA in a heartbeat.
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broadstone
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Re: What would you do at 50 yrs old?

Post by broadstone »

Charon wrote: Wed Sep 21, 2022 10:08 pm
broadstone wrote: Wed Sep 21, 2022 7:25 pm "Despite similar limits on annual contributions, the solo 401(k) can help you save more quickly. The SEP IRA allows you to save 25 percent of your income in the account. In contrast, with a solo 401(k), you can save up to 100 percent as an employee contribution, up to the annual threshold, and then you can flip to employer contributions at up to a 25 percent rate."
By the way, that 25% employer-side contribution is only for corporations, where you're issuing yourself a W-2. If you have a sole proprietorship or partnership, it's 20% of net income, which involves your business deductions, 1/2 of your self-employment tax, and your employee-side contributions.

As we've said, i401(k)s are complicated. I use one for my wife, but that's only because in some good years she makes enough to make it worthwhile, and she can contribute well over the SEP limits. If she had a consistently lower income, I'd use a SEP IRA in a heartbeat.
Got it. Well I'm hoping my income will increase so I can contribute more. I'll look into the SEP so thanks for the info.
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